Fdic Begins Supervision Of Nn Thrift

March 31, 1989|By DONALD LOEPP Staff Writer

NEWPORT NEWS — Community Federal Savings and Loan was placed under the supervision of the Federal Deposit Insurance Corp. on Thursday.

The tiny black-owned thrift - the second smallest savings and loan in Virginia - was one of nine institutions enrolled in the government's joint regulatory oversight program. A total of 175 troubled savings and loans are currently being supervised by the federal government.

A managing agent from the FDIC has taken over at Community Federal, heading the association's board of directors "for a yet-to-be-determined length of time," said Andrea Plater, a spokeswoman for the Federal Home Loan Bank Board in Washington.

"The managing agent will make recommendations to the managers and help to design a new business plan for the institution," Plater said.

The government will help run the savings and loan until federal money is available to sweeten a merger or takeover deal for Community Federal, Plater said.

"For depositors, there will be no change, this is business as usual," Plater said. "For the institution, this just means that there's another level of government regulators with expertise to try to solve the institution's problems."

Community Federal has been insolvent for the past seven years. The institution currently lists assets of $9 million and liabilities of $10.1 million.

The FDIC started taking control of failed savings and loans Feb. 7. Deposit accounts in the insolvent institutions are still insured to $100,000 by the Federal Savings and Loan Insurance Corp.

Community Federal was founded in 1957 by four black businessmen who pooled $64,000 to establish a place where people in the city's East End could save their money and get mortgages to buy homes.

At first, the thrift operated out of a desk in a local insurance and real estate office. Today, the institution still has only one office, at 1512 27th St. near the Hampton city line.

Community Federal isn't a typical example of a takeover candidate in the troubled savings and loan industry. Many insolvent savings and loans ran into trouble in the early 1980s after the federal government deregulated the industry, and managers invested in risky real estate deals.

Community Federal, however, has a reputation locally for being ultra-conservative. More than 90 percent of its loans are on home and church mortgages and consumer loans, said President Thaddeus B. Holloman.

Holloman said Community Federal first got into trouble as interest rates started to rise in the early 1980s. To keep its deposits, the thrift raised its interest rates to double-digit levels.

At the same time, existing mortgages were bringing in returns of only 6 percent to 7 percent, and few people took out higher-rate mortgages.

Community Federal is a mutual savings and loan association, meaning it is owned by its depositors and borrowers, who have the power to elect the board of directors.

Plater said Federal Home Loan Bank policy is to look for minority rescuers for targeted minority savings and loans.